Japan’s value opportunity has a ”long way to run”, says Asset Management One
17 NOV, 2025
By Joanna Piwko from RankiaPro Europe
The opportunity to invest in Japanese equities as a compelling value play still has significant room to run, according to Asset Management One (AMO), one of Japan’s largest asset managers with $489 billion in assets under management. The firm argues that Japan offers some of the richest value opportunities among developed markets–supported by structural reforms, corporate governance improvements, and a long-awaited shift in interest rate dynamics.
A market rich in undervalued companies
Value investors–those who seek companies trading below their intrinsic worth–currently find Japan unusually fertile ground. As of June 2025:
- 40% of Japanese companies traded at a price-to-book (P/B) ratio below 1.
- In stark contrast, only 3% of companies in the U.S. S&P 500 traded below book value.
- In the Eurozone, the figure was 16%.
This unusually large proportion of undervalued companies reflects decades of subdued equity performance, but AMO believes this is now changing.
Corporate governance reforms: a game-changing catalyst
Japan’s ambitious and widescale campaign to improve corporate governance and enhance shareholder returns is, according to AMO, one of the most powerful catalysts for unlocking value.
The Tokyo Stock Exchange’s reform agenda has pushed companies to:
- Focus corporate strategy on improving shareholder returns.
- Increase the use of share buybacks to reduce discounts to book value.
Buybacks have surged, doubling from ¥10 trillion in 2023 to ¥20 trillion in 2024, with strong momentum continuing in 2025. This rise in buybacks, combined with governance reforms, has already contributed to Japanese equities reaching new highs.
Interest rate normalisation boosts banks
Another critical tailwind comes from Japan’s shifting interest rate environment. After more than eight years of negative rates, the country has begun to exit its long deflationary period.
This turn in the rate cycle is particularly significant for the banking sector, which has long represented a major component of value portfolios in Japan and Europe.
Rising rates typically widen the spread between short– and long–term yields, allowing banks to earn higher net interest margins. This trend is already evident:
- The spread between the five-year and one-year Japanese Government Bond yields–a proxy for banks’ lending margins–has expanded from 4 basis points in 2020 to 49 basis points (0.49%) today.
This shift is expected to provide meaningful earnings support for Japanese banks, many of which have traded at deep value levels for years.
From value trap to value play
Oleg Kapinos, Head of Global Distribution Strategy at Asset Management One, highlights the multi-layered nature of Japan’s value opportunity:
“The value investment case in Japan is very solid, especially as there are some clear catalysts that should help deliver performance for value stocks. The last three decades for Japanese equities put a large part of the Japanese stock market into value territory. However, a consistent campaign of corporate governance reforms over recent years is starting to bear fruit, and many stocks are poised to close their discount to book value.”
He adds:
“With the Japanese economy continuing to recover, we should see Japanese equities improve their relative position versus other developed markets. So you have several trends that should improve earnings for Japanese value stocks – corporate governance reforms, growth in the economy and far better trading conditions for Japanese banks. The end of the period of stagflation in Japan has turned Japan from being a value trap into a strong value play.”
Accessing the opportunity: AMO’s Japan value UCITS Fund
For investors seeking exposure to this theme, Asset Management One International’s Japan Value UCITS Fund provides a focused value strategy.
Performance highlights:
- 20.1% annualised return (net of fees) in yen share class.
- This compares to 16.2% for its benchmark, the TOPIX Total Return, marking strong outperformance.
- 13.3% return year-to-date (as of August 31).
The fund aims to outperform the benchmark by 3% annually over the long term, gross of fees.
Its investment process uses a bottom-up approach, selecting undervalued companies based on discounted cash flow valuation, while also screening for risk factors, earnings confidence, and potential catalysts to unlock value.
This article is for informational purposes only and does not constitute financial advice.
